Senate committee mulls retrans reform

Network chiefs speak before D.C. on retransmission consent

The combatants in the battle over proposed changes to the retransmission consent law squared off before a Senate subcommittee Wednesday during a rare lame-duck hearing filled with frustrated lawmakers and industry execs.

The scene was the Senate communications subcommittee, which was spurred by recent rancorous negotiations between News Corp. and Cablevision that led to a 15-day blackout of Fox stations for Cablevision subscribers. The panel is delving into whether new government rules are needed to protect consumers and make the retrans negotiation process more transparent, as cable and satellite operators have argued.

On hand were top execs from Cablevision, News Corp., Time Warner Cable, Univision and indie arts channel Ovation.

The hearing began with a stern warning, on matters far afield from retrans, from Commerce Committee chairman John D. Rockefeller IV (D-W.Va.) about the “entertainment machine’s race to the bottom.” Rockefeller said, “The system we have for developing TV content, packaging that content and distributing it to consumers is broken.” For example, he said, instead of being a watchdog that checks on government access, we have the “endless barking of a 24-hour news cycle” as well as journalism that’s ravenous for the next rumor instead of the facts.

He called the retransmission consent issue part of a broader discussion that needs to be held, one that has angry citizens at its core. “If you fail to fix this situation, we will fix it for you,” he warned. “But when we do, we will seek to do more than referee your corporate disputes because more than just retransmission consent ails our television markets.”

Subcommittee chairman John Kerry (D-Mass.) said he favors a dialogue among parties so the market can operate as it has in the past. But he feared that government action might backfire in the rapidly changing communications landscape.

Glenn Britt, chairman-CEO of Time Warner Cable, began with an argument for reform of the retrans negotiation process, which he said was created 18 years ago long before broadcast webs owned cable networks marketed in bundles to systems.

“Time Warner agrees that free markets are preferable, but retransmission consent is not a free market. It’s a special privilege given to broadcasters like exclusivity and free use of airwaves,” he said. Britt said Time Warner does not object to paying for broadcast signals, but a fair process is needed.

News Corp. prexy Chase Carey told the panel that Fox justifies seeking a “more than fair” price for its stations since the web averages more than 8 million viewers during primetime, more than the top three cable channels combined. Even so, Fox is seeking several times less than cable nets with a fraction of its ratings, he said.

Carey said the recent deal with Cablevision was brokered only after it became clear that the government was not going to step in to “rescue” Cablevision from a free market negotiation. “Once Cablevision came back to the bargaining table, we were able to negotiate a deal quickly.” Had the FCC intervened, “Cablevision would not have come back to the bargaining table, and we likely would still not have a contract in place,” he said.

The Fox topper warned that if the government does modify laws governing retrans consent, the loss of valuable news, sports and entertainment programming could result. “If we can’t sell our content for a price that allows us a fair return on our investment, we will no longer be able to invest in the high quality content that viewers enjoy,” he told the panel. He said a second revenue stream is needed so Fox can compete against cable webs for sports events such as the Bowl Championship Series, for which it was outbid by ESPN.

Cablevision chief operating officer Tom Rutledge agreed that signal carriage disputes are “wrecking havoc with consumers” but said the price demanded by Fox was far higher than in agreements settled with ABC and CBS and more than it could bear.

“We are fighting for customers with lots of competition. Doing so has us fixated on cost,” he said.

Rutledge said the current regulatory scheme benefits broadcasters, which are free to create the potential for TV blackouts. “Because government laws created the problem, only government can fix it,” he said. He said must-carry rules also require cable systems to buy broadcast channels before cable channels regardless of whether subscribers want them. “But nothing prevents a broadcaster from pulling a signal before a big event like the Academy Awards or the Super Bowl.”

Univision topper Joe Uva said revenues from retrans has enabled the Spanish-language net to grow while empowering Hispanics throughout the U.S. Ovation CEO Charles Segers urged reform of regulations to ensure that consumers have access to his indie web, which faces unfair competition from bundled programming decisions.